Ford's green example
LOGAN, UTAH — Ford's public declarations that it intends to become the most environmentally responsible automaker has received both cheers and jeers from industry analysts, environmentalists, the media, and even from within its own management ranks.
The tenor of this response reached a crescendo with chairman Bill Ford's declaration in May that sport utility vehicles (SUVs) are harmful to the environment. Given that the automaker's position as the most profitable car manufacturer on earth is attributed largely to its popular SUV product lineup, Mr. Ford sounds heretical to some and sanctimonious to others.
What will it take for Ford to continue its market success by going green? Some claim a green strategy is a no-win proposition, particularly if a business can't deliver in due course. Although socially commendable, proclaiming environmental responsibility casts corporate actions into the public spotlight where environmental hawks and the media scrutinize corporate moves and blazon potential contradictions. Ford is now facing such carping regarding his stance against raising "CAFE," or corporate average fuel-economy standards, on trucks, vans, and SUVs to match that of cars, which is favored by the environmental community. He believes in incentives rather than mandates.
Despite the public-relations and internal management-alignment challenges of going green, a growing body of research shows that green initiatives can pay off. One way is through cost savings. "Eco-efficiency" attempts to find ways to operate more efficiently to conserve natural resources. For example, Starbucks Coffee has cut paper- cup usage to save forests by encouraging customers to use their own washable coffee mugs. The move has saved the coffee chain millions of dollars each year.
In the same light, Ford's recently announced gas-electric hybrid SUV, due in 2003, is expected to achieve more than 40 miles per gallon. Such fuel efficiency will appeal to a broad range of consumers far more than any lower emissions rating. Ford's recent condemnation of SUVs may be, in part, a savvy move to create dissatisfaction with present SUVs and whet the public's interest in its upcoming hybrids.
But creative positioning of Ford's green agenda to attract consumers will not lead to a product differentiation advantage if competitors can imitate such moves. Honda already has launched a gas-electric hybrid sedan, and last month Toyota announced the launch of its own hybrid SUV by 2003 to rival Ford's. Thus, Ford probably can't rely solely on product differentiation for continued success.
Where Ford can expect significant gains will be from its playing a maverick in an industry caught off guard. Mr. Ford has ordained himself as the industry mouthpiece, and by raising the environmental bar he is forcing his rivals to halt and rethink a domain previously not considered strategic. Ford is already climbing the technological learning curve by making all of its SUVs, minivans, and pickups far cleaner in standard tailpipe emissions than required by federal law. Observe how Ford's rivals have been scrambling in recent weeks to declare their own green initiatives - all sounding like also-rans.
In short, Mr. Ford is redefining the industry, forcing his competitors to play by his rules. No longer will auto manufacturers be able to stonewall together against tighter mileage and emissions standards if Ford can demonstrate their feasibility. Mr. Ford's provocative green statements also have the potential to attract and retain managers, scientists, and engineers who share his vision, providing the automaker with the needed brainpower to build on initial success.
Perhaps Mr. Ford's most cunning move is his shrewd wooing of the environmental community. The Wall Street Journal reports that although initial discussions have not been easy, Ford officials have visited offices of major environmental groups around the world, and activists have toured Ford's Michigan advanced-technology labs and test-driven Ford's alternative fuel prototype vehicles. While it may take years, if ever, for any substantive agreements to emerge from this courtship, such actions foster mutual sensitivity to each side's needs as well as respect and dialogue.
In sum, companies make money by solving customer problems. Mr. Ford is expanding this principle to make money by solving society's automotive environmental problems. His mission will drive innovation, move his company ahead of the regulation curve, leverage the synergistic influences of environmentalists and their allies in the industry, and outdistance the competition. His green strategy will lead the world to cleaner cars and his company to greener profits.
*Cathy L. Hartman and Edwin R. Stafford, marketing professors at Utah State University, research environmentalist-business collaboration and sustainable marketing strategy and relationships.
(c) Copyright 2000. The Christian Science Publishing Society